Chamberlin: Engineer on the recovery trail following City fundraiser

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About the company

Chamberlin PLC (LON:CMH) has adopted the corporate motto of “difficult things done well”, reflecting its marriage of “technical excellence with outstanding customer service”. In years past it might disparagingly have been referred to as a metal-basher; however, it’s anything but.

For example, the castings divisions (Chamberlin & Hill and Russell Ductile) produce high-quality iron products ranging in weight from 0.1kg to 5,000kg for the automotive, construction, power generation, steel, rail, and industrial sectors.

The engineering arm, Petrel, creates lighting for use in hazardous areas such as petrochemical production facilities, as well as a range of control gear and electrical installation equipment.

The unique selling point is, according to the AIM-listed business’ website, as follows: “We are committed to growing the business in such a way that product intellectual property or process know-how (such as in our casting foundries) creates a competitive advantage over low wage economies and where operational excellence can deliver outstanding results.”

How’s it doing?

Chamberlin has been hit by the double whammy of Covid and Brexit. Last December, BorgWarner, the American automotive supplier and key customer, proffered notice of early termination of all contracts it had with Chamberlin. Sales for the 11 months to February 28 were £20.6mln compared with £23.9mln a year earlier) and the group was loss-making over the period. The plan is to return the business to profitability in the second half of the new financial year.

Sounder financial footing

Net debt (plus deferred VAT and PAYE) totalled £5.5mln as at February 28, according to the March 26 trading statement that accompanied a £3.5mln placing of and subscription for new shares in the business. The cash injection will fund working capital requirements and meet the costs of restructuring the business.

Keith Butler-Wheelhouse, former boss of Smiths Group and Chamberlin’s chairman, provided this commentary: “Management are confident that sales at Chamberlin will stabilise in the first half of the new financial year and will then grow from the post-BorgWarner low, with the growth gathering pace in the second half. The board expects growth from all business units and a return to profitability and cash generation post our restructuring.”

The shares…

Research house Hardman said: “Although at this level, they represent the opportunity to invest in a cyclical stock with good operational leverage, they are likely to tread water in the near term until significantly brighter prospects become more visible.”

As at April 28, the stock was trading at 9.1p.

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